TNK–BP is a joint venture company between TNK (Tyyumen Oil Company) and BP (British Petroleoum) in Russia. British Petroleum, was the world’s third largest oil and gas supermajor who was founded as the Anglo Persia Oil Company. BP’s upstream business operated in various countries (USA, UK, Australia, Angola, Azerbaijan, Canada, Egypt, Russia, Trinidad, Tobago and Indonesia). BP’s production growth was constrained by its mature oil fields, so BP was aggressively looking for new reserves and the stake in TNK-BP was a major part of expected production growth.
In recent years, BP’s financial performance in many areas lagged behind that of ExxonMobil and Shell. TNK, a company held 50-50 by a group known as Alfa Access/Renova or AAR. TNK was created in 1997 from a cluster of 600 upstream and downstream companies in Russia and Ukraine acquired through various privatization auctions. AAR was a complex alliance involving three private investment companies : Alfa Group by Mikhail Maratovich Fridman, Renova Group by Viktor Vekselberg and Access Industries by Len Blavatnik.
Russia was the world’s largest natural gas producer and second largest crude oil producer Oil and gas revenues made up about 50% of russian budget revenues. Russian oil and gas industry was dominated by six large firms : Foreign investor (TNK-BP, Lukoil) and Goverment controlled (Gazprom, Rosneft, Surgutneftegaz and Tatneft). Gazprom was Russian largest company and the world’s largest gas production.
Problems of oil industry in Russia : (1) Aging oil fields and poor maintenance, (2) a tax and regulatory regime that was increasingly viewed as confiscatory by oil companies and (3) a dearth of Russian and foreign investment in exploration and development. TNK-BP develop and operate Russian oil discoveries. Joint venture was set up because of shareholding of Sidanco was owned by BP and TNK. But in fact, BP and TNK have different prespective in running business, this may caused conflict between them. The history of TNK-BP joint venture : In 1997 :
* BP paid $571 million to Uneximbank for 10% ownership stake in Sidanco. * The deal gave BP 20% of voting rights, a seat on the board, and the right to nominate CO and FO. * The intent was that BP and Sidanco would set up a joint venture. In 1998 : * Sidanco’s subsidiary, Chernogreft was driven into bankcruptcy by TNK (Tyumen Oil Company) because of large debts continued to rise. * TNK held by AAR (Alfa Access/Renova). * AAR was a complex alliance involving three private investment company : Alfa Group by Mikhail Maratovich Fridman, Renova Group by Viktor Vekselberg, and Acces Industries by Len Blavatnik.
In 1999 : * BP wrote off $200 million of its investment in Sindaco. * Chernogorneft was sold out of bankcrupcy for $176 million to TNK. * TNK and BP announced an agreement under which Sindaco would regain Chernogorneft in return for TNK receiving 25% stake in Sindaco. In 2000 : AAR’s controlling shareholders replaced Unexim Gruop as the dominant shareholders of Sindaco. In 2003 : * The new company TNK- BP announced that BP’sa major strategic alliance with the same companies with which it had battled for control of Sidanco.
* For 50% stake, BP would pay AAR $3 billion in cash and three subsequent annual payment of $1,25 billion in BP shares. In 2004 : A major restructuring simplified the complex TNK – BP holdings ( a dozen subsidiaries and hundreds of legal entities). In 2005 : * Made joint venture agreement. * BP appointed Robert Dudley ( a veteran Amoco and BP executive) as CEO TNK-BP. II. IDENTIFICATION OF ISSUE The main issue of this case is conflict between BP with TNK-AAR and Russian government. This issue was proved by some facts : * CEO TNK-BP, Robert Dudley asked to resign by Russian shareholder.
* AAR-TNK and BP have different type of running business. * TNK-BP is difficult to develop because of government policy which is not support their business conflict with AAR-TNK * Expatriate visa problems for BP * “The Alfa Playbook” III. CASE ANALYSIS To analize this case, we try to describe the external and internal environment of TNK-BP. This is needed to prove that TNK-BP is worth to hold or not. External Analysis (Porter’s Five Forces) : Internal Analysis (Four Criteria of Sustainable Competitive Advantadge) :
IV. CONCLUSION AND RECOMMENDATION We conclude that TNK-BP is an example of joint venture which is fail to create new competitive advantadge. So that, we recommend BP to sold their share to LUKOIL with an agreement between them to create joint venture BP-LUKOIL. V. LESSON LEARNED From TNK-BP joint venture case, we can learn that not all of joint venture is succesfull and give the company a new comptitive advantadge. There are some problem that may face by the joint venture company, such as figure below.